QNP Green Ammonia Project Feasibility Study Knowledge ...

1 1 H QNP Green Ammonia Project Feasibility Study Knowledge SHARING REPORT June 2020 QNP Green Ammonia Project Feasibility Study Knowledge SHARING REPORT 2 Lead organisation Queensland Nitrates Pty Ltd (QNP) Project Commencement Date 23 September 2019 Completion Date 30 April 2020 Contact name Douglas Ferres Email Report purpose The purpose of this report is to share the learnings from QNP s Green hydrogen to Ammonia Feasibility Study undertaken in 2019 and 2020. Acknowledgement This Project received funding from ARENA as part of ARENA's Advancing Renewables Program. Disclaimer The views expressed herein are not necessarily the views of the Australian Government, and the Australian Government does not accept responsibility for any information or advice contained herein. Important Notice QNP has prepared this report for the purpose of fulfilling its knowedge sharing agreement with the Australian Renewable energy Agency (ARENA).

2 The report has been prepared using information collected from multiple sources throughout the Study . While care was taken in preparation of the information in this report, and it is provided in good faith, QNP make no warranty as to the accuracy, validity or completeness of the information provided. QNP accepts no responsibility or liability for any loss or damage that may be incurred by any person acting in reliance on this information or assumptions drawn from it. QNP Green Ammonia Project Feasibility Study Knowledge SHARING REPORT iii Table of Contents 1 1 2 1 3 4 4 7 5 8 6 11 7 14 8 15 9 19 10 20 11 22 12 Introduction Executive summary Project Description The consortium Technical Feasibility Commercial Feasibility Commercialisation pathway Lessons learned Risk management Project stakeholders Conclusion Acronyms and abbreviations 23 List of Tables Table 1: Feasibility Study key technical considerations.

3 8 Table 2: Range of Plant Costs .. 12 Table 3: Sensitivity analysis .. 13 Table 4: Feasibility Study key lessons learnt .. 15 Table 5: Major Project risks and Risk Mitigation .. 19 Table 6: Project Stakeholders and Engagement Methodology .. 20 List of Figures Figure 1 Proposed Green hydrogen to Ammonia plant in context of the existing QNP ammonium nitrate plant .. 3 Figure 2 Project concept schematic .. 5 Figure 3 - Overview schematic .. 5 Figure 4 - Total Installed Cost breakdown by key sector .. 11 Figure 5 - Breakdown of annual operating and maintenance cost estimate .. 12 QNP Green Ammonia Project Feasibility Study Knowledge SHARING REPORT 1 1 Introduction The purpose of this report is to provide information regarding the QNP Green hydrogen to Ammonia Project Feasibility Study .

4 The Study was undertaken from September 2019 to April 2020 by Queensland Nitrates Pty Ltd (QNP), Worley and Neoen. The Study explored the opportunity to develop an electrolyser plant with capacity to produce 3,500 Tonnes/Year (T/y) of Green hydrogen and a small-scale Ammonia plant capable of converting that hydrogen into Green Ammonia (20,000 tonnes/Year (T/y)) This report contains a description of the Project , and the consortium partners as well as providing discussion regarding the technical Feasibility of the Project . This is followed by a discussion of the commercial Feasibility of the Project and the potential for an unsubsidised large scale Ammonia plant to be commercially viable. The Feasibility Study determined that the Project is technically viable, but it requires significant government support in the form of grants and concessional loans to be commercially viable.

5 A pathway towards commercially viable large scale Green Ammonia production was identified. This report is written for a broad audience including government, academia, research institutions, developers and financiers of both electrolysis and small-scale Green Ammonia plants. 2 Executive summary Queensland Nitrates Pty Ltd (QNP) partnered with Neoen and Worley to undertake a Feasibility Study into the development of Australia s first Green hydrogen to Ammonia plant at QNP s Moura site. The proposed facility includes a 30 MW electrolyser and a small-scale Ammonia plant consuming 208 GWh of electricity. The plant will produce 3,500 tonnes/Year (T/y) of Green hydrogen to yield 20,000 T/y of Green Ammonia to displace Ammonia which is currently purchased by QNP for use at its ammonium nitrate facility at Moura.

6 QNP s Moura facility produces ammonium nitrate which is the key ingredient in explosives that are used in the Queensland mining industry. The current facility produces hydrogen via steam reforming of natural gas. The addition of nitrogen under suitable conditions ( Haber-Bosch process) yields Ammonia which is subsequently used to manufacture ammonium nitrate. QNP currently has an imbalance between Ammonia production capacity and ammonium nitrate unit capacity and makes up the shortfall in Ammonia production through the purchase of Ammonia . The QNP Green hydrogen to Ammonia Project seeks to displace purchased Ammonia by manufacturing Green Ammonia on site. The precursor to Green Ammonia production is the production of electrolytic hydrogen through disassociating water using renewable electricity.

7 QNP will utilise 100% of the hydrogen produced in the Project for internal use to manufacture ammonium nitrate to satisfy existing contracts, hence QNP does not need to seek new markets for either the hydrogen, Ammonia or the downstream ammonium nitrate that will be produced, The Feasibility Study explored whether aligning a series of existing mature and commercialised processes in novel alignment could yield a technically and commercially feasible Project . The Study found that the technologies themselves are technically feasible. Much of the learnings from the Feasibility Study arose QNP Green Ammonia Project Feasibility Study Knowledge SHARING REPORT 2 from the novel alignment of the renewable energy generation assets, the electrolysers, the hydrogen storage and the Ammonia plant.

8 The Ammonia plant is designed to be operated continuously at consistent rates, while the electrolysers will be operated intermittently to minimise electricity cost meaning that hydrogen storage is required. Key questions addressed by the Feasibility Study included: Operating characteristics of large scale electrolysers Capital and operating costs Optimal location for the renewable electricity generation assets relative to the Moura site Grid stabilisation benefits Optimal electrolyser load factor this question is particularly interesting since higher load factors incur higher power prices, but lower capital cost and vice versa Optimal hydrogen storage requirements Vendor readiness The Feasibility Study determined that the generation assets could be located remote from the plant and the demand responsive behaviour provided a valuable grid stabilisation service.

9 The highest technically viable electrolyser load factor, with higher power price but lower capital cost was the optimal solution. The Feasibility Study determined that the Project is economically viable with sufficient funding support in the form of grants ( from ARENA) and concessional loans. Without funding assistance, the margin between the cost of inputs (primarily energy) and the value of the output ( Ammonia , a commodity with pricing linked to global benchmarks) is insufficient to support the Project . There are several options that could improve the Project s economics, these include; increased funding support, lower capital cost, lower electricity energy price, reduced electricity transmission and other operating costs, introduction of a carbon price, increased global Ammonia prices and increasing the size of the plant and selling excess Green Ammonia to third parties.

10 The figure below shows the footprint of the QNP Green hydrogen to Ammonia plant adjacent to QNP s existing facility at Moura, Queensland. QNP Green Ammonia Project Feasibility Study Knowledge SHARING REPORT 3 Figure 1 Proposed Green hydrogen to Ammonia plant in context of the existing QNP ammonium nitrate plant QNP Green Ammonia Project Feasibility Study Knowledge SHARING REPORT 4 3 Project Description Queensland Nitrates Pty (QNP), Neoen and Worley (the Consortium) undertook a Feasibility Study into the development of Australia s first Green hydrogen to Ammonia plant. The proposed facility includes a 30 MW electrolyser and a small-scale Ammonia plant. The Project will produce 3,500 T/y of hydrogen to yield 20,000 T/y of Ammonia which will displace Ammonia currently purchased by QNP for use in its ammonium nitrate facility at Moura.